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Author Topic: What is the true nature of cryptocurrencies?  (Read 103 times)
ube93 (OP)
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October 15, 2017, 05:33:36 PM
Last edit: October 16, 2017, 12:28:07 AM by ube93
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I am new to cryptocurrency investing, but I had a few things on my mind, that I wanted to clarify from other experienced users.

When we are talking of different cryptocurrencies, we find that many of them have different utilities. BTC compensates users for mining them, so when we assign a value to it we are just assigning a price for the computational power used to mine it. Etherium uses tokens called 'ether', but etherium's goal is to provide an ecosystem for a blockchain, where other Decentralized Apps (DAPPs) can be implemented. For these apps to make use of etherium's distributed node system, they need to compensate the owner of the distributed nodes by ethers, and it is these ethers that command value. Other currencies just rectify a flaw or are created keeping similar but other objectives in mind.

What I am trying to do here is answer a few questions that continue to pester me:

1. Is Bitcoin analogous to an app, while etherium analogous to an OS such as Windows/Android.
2. Say a newer technology appears, more efficient than blockchains and people move onto that, Bitcoin being like an app can easily be transmigrated over to the new platform, preserving all its features, but etherium will dissolve since its core intention is to be a blockchain only enabling system.
3. Since ether is what my apps need to use the system, then the value of ether will appreciate in a case where the implementations become robust, similarly other systems that can provide other blockchain infra/features for a niche will makes them the dominant player in that niche.

From an investor's standpoint, one's intention should be to see the most important drawback of the existing system and place a bet on the currency he/she feels addresses those drawbacks. Having said that, I return to my original question:

All these cryptocurrencies are tokens for their own version of a blockchain centric OS, and now the race is to find the OS that fits the bill. And we are assigning a value to these tokens, keeping in mind that if their version of the OS becomes the dominant player, then apps/dapps will need those tokens and pay me a premium for it. Is my understanding correct?


TL;DR: Read the portion above in bold
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